Telecoms: Plan for all homes to have superfast internet by 2010

Three pilot schemes will be set up to study how much it will cost to link up rural areas where it is not viable for private companies to fund the infrastructure.

Up to 300m from the BBC licence fee which had been set aside for the digital switchover could be offered to plug the gap in those areas as Ministers accept that without some subsidy internet providers would invest in the new technology in big towns and cities first.

Culture, Media and Sport Secretary Jeremy Hunt said: "We want to understand better how much the market will provide and how much needs to be coughed up by the taxpayer. The money will be given to the people who give us the biggest bang for our buck."

The coalition Government is standing by Labour's pledge to provide basic broadband access – with speeds up to 2Mbps – to every home by the end of 2012. The aim is that superfast access, which could be 50 times faster, would be available across the country within a decade.

Mr Hunt said yesterday that superfast broadband could allow children to be taught at home and even promote "telemedicine", with patients undergoing surgery while an expert in a different location supervises.

He said the market should "lead the way" wherever possible, and warned BT and Virgin there was no endless pot of subsidy to help install the fibre-optic cables.

But he said there was also a role for the government to avoid opening a "digital divide" between urban areas, where technology can be installed cost-effectively, and the countryside, where it is not viable but is seen as essential to the future of rural businesses and for public services in remote areas.

The location of the three pilots is yet to be decided, but as well as benefiting those areas the Government is also hoping they will identify just how much subsidy will be required.

Mr Hunt said: "Superfast broadband is not simply about doing the same things faster, it's about doing totally new things. And it isn't only about business – it's about opening up new opportunities to improve public services such as education and healthcare.

"We have to make sure that the benefits of superfast broadband are available to everyone, including those in rural areas."

Environment, Food and Rural Affairs Secretary Caroline Spelman said: "Providing effective broadband connections for rural communities is one of my top priorities.

"Broadband access for rural communities is essential if we are to provide the means for their economies and businesses to grow and to minimise the social digital divide for people living in rural areas.

"I will work closely with colleagues across Government to make this happen."

High-speed WEB to bring 18bn boost

Superfast broadband could be worth 18bn to the UK economy and create 60,000 jobs, says the Federation of Small Businesses.

The Commission for Rural Communities argues it is vital to countryside, allowing businesses in remote areas to thrive, patients to access healthcare online rather than facing lengthy journeys, and children to benefit from extra tuition online.

To cut the cost, broadband providers will be able to lay the fibre-optic cables using existing infrastructure, including ducts, sewers and telegraph poles. If needed, the government will force firms to open up their infrastructure.